A CHAT WITH MARC ANDREESSEN: 'IF THIS FAILS...IT WILL HAVE BEEN OUR OWN FAULT'
What's it like to be Marc Andreessen? How does it feel to ride the roller coaster that Netscape has been since Andreessen co-founded it barely four years ago? What's coming next for the company that made the Web a part of contemporary life but is now facing threats to its own existence? To find out, Steve Hamm of Business Week's Silicon Valley bureau talked and talked and talked with Andreessen the technologist, the executive, and the person. What follows are extensive excerpts from their wide-ranging conversations:
BW: What's the big innovation opportunity that you're engaged in?
Andreessen: In 50 years or 100 years, every business and individual on the planet is going to be interconnected with a network. We're in the early stages of building it. The kinds of things that happen and the kinds of opportunities that open up -- the entire computer industry and telecommunications industry and media industry are reorienting themselves toward it. It's a huge technology shift. It's a lot bigger than anything that came before -- including electricity -- by the time it's all over.
It's essentially creating a new world that is overlaid on top of the physical world. It is going to be where most of the very interesting things that happen in the worlds of business and entertainment and how we fundamentally live and work and play and learn are going to happen. It has extremely profound effects. It's deeply interesting from a technology standpoint and for what a technology company can do. It means that in our case, [creating] the ranges of software and services that need to be provided to get all these individuals hooked up and to get all these businesses hooked up, to get business happening online, and to make it easy for people to live and work online. Over time, [people will] be able to network not only personal computers, but a dizzying array of other devices -- anything with a sliver of silicon is going to be networked over the next couple of decades.
The opportunities for innovation all spin out of that.... It's not splitting the atom or discovering a new planet. But it's a huge process that the entire world will be going through.
BW: There's no ah ha! breakthrough?
I think that will repeat multiple times.... There will be certain points of time when everything collides together and reaches critical mass around a new concept or a new thing that ends up being hugely relevant to a high percentage of people or businesses. But it's really really hard to predict those. I don't believe anyone can.
BW: You're fully engaged in the engineering as a hands-on manager. But your company is imperiled. What happens to all your drive if Netscape is merged into a bigger company?
Andreessen: That all depends. What's the bigger company, and what would the new mission be? Our intention is to build a successful independent company. We see tremendous opportunity. As far as I'm concerned, if this fails -- which I don't think it will -- it will have been our fault. We will not have been creative enough, or will not have executed well enough. That's one of the things that really keeps me engaged. I do think there is such enormous opportunity. If we're creative enough and if we execute well enough, we can take huge advantage of the situation we find ourselves lucky enough to be in.
BW: What's the likely outcome for Netscape? How would you handicap it now?
Andreessen: For the next several years, at least, independence. Over the very long term, it depends on what happens to larger industry trends. It depends on how quickly Netscape is able to grow.
Netscape's in an interesting position right now. We're no longer a small startup with a single product and with three sales reps calling on the usual suspects of early adopters. We're a much larger organization than that -- now with 2,800 people, a large sales force, and global distribution. On the other hand we're not IBM and we're not Microsoft. So if we're able to execute quickly enough, if the technology keeps changing quickly enough, and if the market demand keep changing enough, if customers continue to be as aggressive in adoption of radically different product, and if we're able to piece together a broader and broader solution set, then we can become one of those. If in five years we're not there, it will probably make sense to become part of a bigger company.
BW: The Monday-morning quarterbacks wonder why you didn't pick a strategy that would keep Netscape out of Microsoft's way. Did you think you could beat them?
Andreessen: Name one. Name a software strategy at this point that doesn't have Microsoft coming at it sooner or later -- especially a software strategy that intends to have a major impact on the way the world lives and works. Name one.
BW: [Long pause] I can't name any.
BW: Did you underestimate how quickly Microsoft would regroup?
Andreessen: We thought they'd move a lot faster. If you look at some of the earliest interviews we did, we said Microsoft would be coming at us almost immediately. And yet they didn't. Through all of 1995, they basically sat there. We assumed -- and continue to assume -- that the landscape could change.
BW: In the early days, you were quickly compared to Bill Gates. People said you'd be the next Bill Gates. Did you ever believe it?
Andreessen: Ugh. No. I never understood what that was supposed to mean. To the extent you believe that Bill Gates and Microsoft are like John Rockefeller and Standard Oil, there are only a few of those -- ever. You could never ever anticipate that. I don't think Bill Gates ever thought he would be the next Bill Gates.
BW: What did you hope to be?
BW: But you said early that the browser and the Internet make the operating system irrelevant.
Andreessen: If the Net becomes the center of the universe, which is what seems to be happening, then the dizzying array of machines that will be plugged into it will virtually guarantee that the specifics of which chip and which operating system you've got will be irrelevant. When it plays itself out is the question. It is happening now, but it is going to happen while Windows continues to be hugely successful. It will happen all around it.
BW: Do PCs suck?
The alternate model is much more Net-centric. The Net is a utility like the phone system where you plug into it an get everything you need on demand. You not only have access to more stuff -- because the Net is much bigger than what you can put on your PC -- but you don't have to deal with all the complexity on your desktop.
BW: Did you dream of knocking off Microsoft?
Andreessen: Hmmm. I wouldn't say so. I don't think so.
BW: Not supplanting them, replacing them, being the Microsoft?
Andreessen: We've never fielded a product that runs on bare hardware [always on top of an operating system].
BW: If you did, of course, you'd be irrelevant eventually, so what's the point?
Andreessen: Here's a thought I'll put forward. We're heading in to this world where the value of having somebody use your browser is in having them as an audience for content and services you can offer. If that's the case, you certainly don't want to charge them. You want to give them the software. And ultimately, you may want to pay them to use it. If you're getting $10 or $30 or $200 or $500 of revenue coming in each year as they're using it, then you'd be happy to give them a slice of that revenue in order to use it. If, in order to get them to use the brower, you threw in a piece of hardware that the browser ran on, and you could cover that under the revenue stream, you would certainly do that. It suggests a radically different future than we see today. It may turn out that we'll end up throwing an operating system in as part of the browser. But we're not there yet.
BW: Here's the real Barbara Walters question.... What's it feel like to be so famous, so young?
Andreessen: [Laughs] How do you answer a question like that? [Pause] I don't know. Can't say I really think about it.
BW: Do you feel worthy of it? Worthy of the fame?
Andreessen: Yikes! Actually there is an answer to that. What happened at Netscape and what happened to me, happened so quickly and so far out of proportion to any thing that would be considered reasonable to people who are not breathing helium, that almost by definition I have to treat it as something totally separate. It's an external phenomenon. It's not directly relevant. There's no correlation. It's like the amount of press coverage that's been given to Monica Lewinsky. Does she deserve to be this famous? It has nothing to do with her. It's all about a much broader set of things.
BW: Do you get a kick out of it?
Andreessen: No, no. It's not at all like Hollywood. Maybe for Gates and [Apple Computer's Steve] Jobs. They've broken out of the confines of the tech industry.
BW: I asked my cousin who has a 12-year-old son who programs in Java -- semiprofessionally -- to ask his son if he knew who Marc Andreessen was. The answer was, "I have no idea."
Andreessen: The media maelstrom happened much too quickly and with much too much intensity to be linked to what we were doing directly. It became bigger than the thing it was about very quickly. It's hard to take seriously. The reality of this is that if there's a certain amount of fame and attention and you don't keep working at it and keep getting better, it's going to vanish. Getting a big head about that would useless. It wouldn't be any good. It would be an indulgence.
BW: While your friends say you don't have a big head, at the same time you do have a reputation for being arrogant -- sometimes blunt. How does that jibe?
Andreessen: Oh sure. I'm not lacking for self-confidence. It's in part because I've proved whatever I need to prove already, so I don't need to prove anything to anyone else. So I'll do what I want to do, and whatever happens will happen. But I typically go into things assuming that if I'm going to try to do them, I'm going to be able to do them, and I'm going to learn what it takes to do them.
I don't think you'll find that I'm not civil. There's a personality type in the engineering world and in the Valley of lack of civility -- or visible arrogance, or people who are very sarcastic. I think it's a detriment for them. But at the same time, I don't like to gloss things over. I don't like to not call a spade a spade. I don't lke to try to duck from what's happening. I have a signature quote on my E-mail these days from Richard Nixon that says: Truth may not always be the best policy, but it's occasionally worth trying. [Laughs]
BW: Recently, most of the stories are: Oh my god, are they going to be sold? Do they have a chance? How does it feel to rise so high and then for people to say you're toast?
Andreessen: First of all, the media only has two stories. Oh, the glory of it, and oh, the shame of it. It's either up or down. The majority of the drama in business never gets reported because it doesn't fit into one of these neatly defined categories. I realized in '95 when the stock went to $85, the stock wasn't at all correlated with any reality. We knew it wasn't. And then, of course, it collapsed. This sort of euphoria or madness is so obviously blown so way out of proportion. It's fun while it lasts, but you know it's not going to last. So, is it as good as it seems? No.
On the other hand, we're now valued at roughly four times 12-months trailing revenues, which for a software company is a fairly respectable valuation. So I wish it were higher, and I wish investors were valuing us much more highly, but I don't know that I can tell them any reason why they should -- given what they know about us now and given that we're going through some product transitions, and that we missed last quarter.
In the end, investors are responsible for their own actions. We have a clear set of legal and ethical obligations -- accurate representation of risk and not hyping the stock. We've never hyped the stock, and nothing has every happened to the company that wasn't published in the risk factors. We've been very responsible in how we've conducted ourselves. I feel bad for shareholders who bought in when the stock was $80 or $85, but they had access to a huge amount of data, and we'll continue to give them as much data as we can.
BW: What was it like the day of the IPO?
Andreessen: I woke up. Looked outside. Logged on. Saw the stock price. Went eek! Closed down. Went back to sleep. Like, I'll deal with this later. We thought the IPO would be successful. We didn't realize it would be that successful. Clark timed it just perfectly. I thought it would take at least a few years. It became a calling card for the company, in terms of brand recognition.
BW: At one point you were worth over $100 million. What was the peak?
BW: When you realized the fourth quarter was going to be a significantly bad quarter, what did you feel?
Andreessen: The first thing you do is say, Oh s---! And then you think about what we need to do to. It's a fork in the decision tree. It's a matter of figuring out what all the options are and what's the right path to take. I didn't cry myself to sleep. I just got to work. I was disappointed in us for doing it, but I didn't mind the process of what followed, figuring out what we had to do. The deeply unfortunate side effect was that people lost jobs.
BW: Do you ever get discouraged these days?
Andreessen: No. I'm happier than ever. It's because I'm more engaged than ever, and I'm really enjoying what I'm doing. This is the thing. In the hypergrowth phase, success hides a lot of sins...you can't stop and fix all the problems. You just have to keep piling on growth, or the whole thing will run away from you. So you're saying, Thankyou god, thankyou god, bring it on.
Now we're in a phase where we can apply a tremendous amount of energy to building a successful software company. The stock is at a reasonable level that reflects underlying fundamentals. We have lots of opportunities. Hard work will translate into results. Into financial payoff. And into happy investors, happy customers, and happy employees.
Frankly, it's kind of refreshing. When the stock was at $80, I'll be damned if I knew what I could do to even fulfill the expectations, much less increase it. I know what I can do now to get it up. All these things I'm doing. I know what I'm doing now has a purpose and will have results. I know I'm in a role to do that. I wasn't before. I'm enjoying this more than I've enjoyed any other phase in the company's history.
BW: Was there a point at which you said, I want to be a manager? Who do I watch? What do I read? When was that point?
Andreessen: When I first started talking to [co-founder James] Clark, I started to realize how interesting business was -- such as management and financials and company growth and how markets are created. So I started to read a lot about it. But the real education was in watching it happen. My learning experience has been watching peple like [CEO] Jim Barksdale. I don't think it was so much a conscious decision to become a manager as it was a conscious awareness that it was a tremendous learning opportunity and I should soak up as much as I can. Since I've taken the job, I've made an effort to make sure I know everything I need to do the job. A lot of it comes down to having structure, doing things when you say you'll do them, do the basics well. Communicate. The rest of it.
BW: What's your biggest personal hurdle now as you continue to develop as a manager and thinker?
Andreessen: Yipes! I'm probably not optimizing how I spend each day quite right. I'm still working on it. I'm watching people and learning that you control how you're spending your day and you're prioritizing right, that's a big part of good management. The things that need to get done, are done. It's the key to being in control. I think I'm doing O.K. on that, but I think I need to do better. That's pretty pragmatic.
The broader answer is I need more raw experience. I've read a lot of things. I've watched a lot of things. But I haven't done a lot of things.
BW: Do you think you'll be like [Jim Clark] some day, a serial company builder. Or will you be an organization person?
Andreessen: I like a lot of what they do, especially firms like Kleiner [Perkins Caufield & Byers]. It's not like they take a hands-on role in running the company, but they take a hands-on role in building the company. Recruiting the management team and helping to develop the strategy and building connections with the rest of the industry. There would be no shortage of opportunities of things to learn. So there's a spectrum.
On the one hand you spend all your time building one company, or you do what Clark does, one every few years; or you do what a VC does, maybe four a year. I'll find something in the spectrum. They're all interesting jobs.
BW: I understand you challenged authority in high school, but politely. You'd raise questions about the relevancy of the curriculum. And you'd piss teachers off.
Andreessen: Conventional wisdom is usually wrong, except when it's right. That's scary. In this industry and the broader business world and in the stock market, if the broad base of people believe something to be true, there's a good chance it's not. The people who have been extraordinarily successful in business are the ones who have specifically rejected conventional wisdom.
There's a saying in the university research world that if an elder respected scientist tells you something is not true or can't be done, you should ignore it. But if they say it can be done, you should pay a lot of attention. That goes around.
We each assemble a model of how the world works in our heads, and the really smart people are going to be adjusting that model constantly. Even then it's hard to adapt to new developments. It's just the way the mind and human nature works. The big opportunities are when a large number of people have mental models that are wrong.
BW: Talk about what happened when the CTO job got stale. Was there resentment? Feeling left out?
Even now, I try to give people a lot of freedom. I'm not a micromanager. But I have a lot more impact. When I say I think we need to do X, now, odds are we'll probably do X, unless it's just a really dumb idea. Last spring, if I said let's do X, people would look at me and they may or may not have paid attention. We fixed that.
Andreessen: Yikes! Man! Friday evening 6 p.m. and you ask me a question like this? The secret to life is a good margarita.... Can we come back to that one?
BW: What do you expect to be doing in five years.
Andreessen: This or something a lot like it.
BW: Running a company?
On the other hand, it's obvious that the CEO works with an enormous emotional burden. The sheer responsibility of having the livelihoods and futures of all those people -- that falls squarely on the shoulders of the CEO. The nice thing about having a job like I have is there's always one more guy to pass the buck up to. He's got nowhere to pass the buck.
It's stressful. I don't think you could do a good job of it and not have it be stressful. You have to take it totally seriously. It requires a huge amount of personal reserves and capabilities.
BW: What was the most significant event in your life?
Updated Apr. 2, 1998 by bwwebmaster
Copyright 1998, Bloomberg L.P.